Politics Home has reported that:
[A]ccording to the Sunday Telegraph two separate sources have confirmed that raising more tax from better-off homeowners had been discussed on separate occasions in the past few weeks at the highest levels of the Treasury and Number 10.
The newspaper said that could manifest itself in a “recurring” wealth tax which would primarily affect London and the South East.
It would either be introduced in the form of a levy, as per Mr Miliband's plan, or with an additional higher band of council tax.
The Budget on March 11 will be Sajid Javid's first since becoming Chancellor, and he is believed to also be looking at cutting pension tax relief for higher earners, which could raise an extra £10 billion a year.
This could, of course, be nonsense. Or a complete red-herring. I have also heard that they are looking at cutting corporation tax and raising VAT. All this may say is that a new Chancellor is looking at all options. And why not?
But suppose there is some truth to this. If it was to be done then Machiavelli would certainly suggest now to be the time to do it.
And who would actually object? We know what the Telegraph, Mail and Express would say if Labour did this, but Labour are nowhere near office for at least five years. As a consequence, the question is so what if they protest? What can anyone do about it? The Tories know that the answer is 'nothing'.
So let's presume that this might happen. The logic is still flawed.
First, it's being done with an aim to balance a budget. And the last thing we need is a balanced budget.
Second, the benefit of higher property taxes goes very largely to those areas in the south-east that already have the greatest council income that have faced fewest cuts. In other words, a little local redistribution might take place there, but the fundamental problems of funding council services in those areas most dependent upon them remain.
Third, the real problems of wealth inequality are not addressed, and only fundamental reform of inheritance tax and, ultimately, its replacement can do that.
Fourth, other glaring issues, like income from investments being taxed at much lower rates than income from work will not be addressed.
And fifth, pension reforms would be welcome, but again are only a step in the right direction.
So is this really an answer to anything very much or just a tinkering at the edge that does nothing, especially if council and property taxes are the focus, to really tackle inequality and the problems it creates, which is the reason why wealth musty be taxed? My answer is no, perhaps unsurprisingly. And because that is all too easy to spot what it seems Sajid Javid may be doing is planning to do is to follow the great Tory Chancellor tradition of the last ten years or so in announcing measures that collapse in a heap of ignominy minutes after they sit down from delivering their speech.
I stress, we need wealth tax reform.
And I would welcome pension tax relief changes.
And I don't deny our property tax system is a wholly unjust mess.
But the reforms are going to have to go somewhat further than stated, and have quite different motives, for them to work. And that's why I have my doubts. This looks like small-minded thinking and not strategic reform, and the latter is what we require.
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Council Tax in the UK is regressive with the highest charge in England being 3 times the lowest, despite the range of property values being much greater than that – it’s typical for a Band H to be 6 * Band A on aggregate, and also for Band A to house one earner or fewer.
Income tax too is regressive once you go into the higher rates as NI drops 10%. People think it’s progressive as PAYE income tax goes up by 20% so there’s a net increase of 10%. But the canny pension planner can defer the 20% increase till later in their life by using that 40% pension tax relief. They’ll pay some of it when they draw down the money, some of which will be tax free and some at 20%. Net result is a regressive tax system.
One way to have a more progressive tax system is to make aspects of the current system less regressive. That doesn’t require tax expertise to make these points.
I get that you are saying that Javid is tackling inequality in the bit of the system that he has some leverage over, and that’s not good because we need to tackle real inequality and its consequences.
The tax system is pretty real to me, and to anyone else who has been taken to court for non payment of a regressive tax.
I accept your points
It is why the whole thing needs rethinking
I tried that in The Joy of Tax
Simon Smith says:
“I get that you are saying that Javid is tackling inequality in the bit of the system that he has some leverage over,….”
In his capacity as Chancellor of the Exchequer which part of the system do you think Javid doesn’t have control of, let alone leverage over ?
Taxes are for the Little People. Jolly boating weather:-
https://www.independent.co.uk/news/uk/politics/boris-johnson-free-ports-tax-trade-brexit-labour-john-mcdonnell-a9325971.html
Didn’t they also announce that pensions might be raided to pay for public services, I think it’s just a con trick, suggest 2 policies at the same time, one to attract the attention of the general public and thanks to the media and one they would rather the public didn’t know about. guess which one will happen, hitting “the 1%” with a mansion tax, or hitting the state pension to pay for public services?
Which one will get through the commons I wonder?
I think we all know that
I too have heard a few recent rumours that government is interested in additional council tax bands – possibly with local decision-making over whether to establish them or not.
But – it’s not necessarily as simple as
“…the benefit of higher property taxes goes very largely to those areas in the south-east that already have the greatest council income that have faced fewest cuts.”
Next year the Govt is going to implement a ‘fair funding review’ that will take into account, amongst other things, council tax income raised locally (i.e. redistributing more money to those areas that have less council tax income). If council tax revenue climbs in south-eastern areas, this could go alongside larger redistribution to other areas. (I say ‘could’ because most of the key decisions haven’t yet been confirmed.)
There was a misleading article on this subject on the front of the Guardian a couple of weeks ago suggesting more money for wealthy areas. Based on all the info available that probably will not be right – the big losers in the review will be the London boroughs (!)
I wouldn’t disagree with your broader point that this is tinkering round the edges, though.
Thanks
But will the review deliver?
That’s my doubt